$Eli Lilly(LLY)$ $ProShares UltraPro Short QQQ(SQQQ)$  $DJIA(.DJI)$ $NASDAQ(.IXIC)$  

Eli Lilly and Company is an American-based pharmaceutical company operating in the human therapeutics segment. The company discovers, develops, manufactures, and markets various human therapeutics, and is well known for its diabetes, oncology, immunology, and neuroscience products. The company focuses on the US (c.64% of FY23 sales) and Europe (c.18% of FY23 sales). As of 13 August 2024, Eli Lilly is globally the largest pharmaceutical company by market capitalisation.

Investment Overview

Since 2018, Eli Lilly’s track record implies six events that would move its share price: (1) key drug launches, (2) favourable clinical findings, (3) spin-off of non-core unit for IPO, (4) patent expiries, (5) product withdrawals, (6) price cut. In 2018-19, its stock price rose c.60% following three successful drug launches and spin-off of its animal health business. In 2019, its stock price dipped c.15% over patent expiries, product withdrawals, and price cuts from public medical insurance programs. In 2020-22, the stock price surged c.133% following the launch of COVID-19 antibodies and Eisai (4523 JP)’s proof of concept for its Alzheimer’s drug. Regarding the Alzheimer’s drug, Eisai’s Lecanemab received positive phase III clinical data in 2020. As Lilly was testing a similar drug, Donanemab, its stock price surged on expectations for approval. Eli Lilly’s phase III clinical data in 2021 delivered positive results. In 2023, the stock price surged c.59% following the launch of Mounjaro for type 2 diabetes in May 2022, which surged to make up 15% of FY23 sales and 24% of 4Q23 sales.

Share price driver ahead 1: Clinical readout of oral GLP-1 Orforglipron for diabetes and weight loss. Globally, c.800m adults are deemed overweight or obese. In May 2022, Lilly launched a dual gastric inhibitory polypeptide and glucagon-like peptide-1 (GIP/GLP-1) receptor co-agonist, Mounjaro, for treatment of type 2 diabetes using the active ingredient Tirzepatide. In November 2023, it followed up with weight-loss drug Zepbound which used the same active ingredient. These two drugs skyrocketed to popularity, together making up 25% of Lilly’s 4Q23 revenues. Currently, weight loss drugs are all administered through injections. Lilly is developing its oral GLP-1 drug Orforlipron for weight loss which saw initial clinical readout from its phase 2 trial results in June 2023, indicating similar weight loss efficacy as global leader Novo Nordisk’s oral GLP-1 drug, Rybelsus. The readout of its current phase 3 trials, likely in 1H25, the diabetes study ACHIEVE and obesity study ATTAIN, would boost Lilly’s share price.

Share price driver ahead 2: Potential approval for Donanemab to treat Alzheimer’s disease (AD) in 2024. Globally, there are 39 million patients suffering from AD. In 1998-2017, the pharmaceutical industry has submitted at least 150 drugs for approval to treat AD, but only 4 were approved (see: How a Swedish start-up reignited the search for an Alzheimer’s drug (ft.com)). Most AD drugs that have been launched help to alleviate the symptoms, and not address the reason for onset of AD. Until Jan 2023, Eisai (4523 JP) received accelerated approval to launch Lecanemab which targets a protein in the human body which induces AD – beta-amyloid. Accumulation of beta-amyloid is a major reason of AD. The drug slowed down disease progression by 27%. Eisai’s share price surged by 38% in 6 months. Since July 2023, Eli Lilly has a drug pending U.S. FDA approval which also targets beta-amyloid – Donanemab. In terms of efficacy, it is stronger than Lecanemab and can slow down the disease progression by at least 35%. Approval of this product is expected in 2024 and can move its share price.

Patent cliff for key products. The patent of one of Lilly’s key product, Trulicity, will see patent expiry in 2027. The product is used to treat diabetes and contributed 21% of group sales in 2023. We expect drug sales to come under pressure after 2027.

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DYODD